The first reason why pinching pennies is not so hot an idea is that it puts the focus in the wrong place.
Most people who pinch pennies do so because they want to save more. Will doing so help you save? Perhaps. Some. In the short term.
In the long term, though, this approach puts the focus in the wrong place. Pinching pennies is a negative act. It is the act of avoiding spending.
What works are money management efforts motivated by a positive purpose. Your focus should be not what you want to cut out of your life, but what you want to add to it. The trick is not to crush your drive to spend, but to develop an equally strong desire to save.
Both frugality approaches aim to increase the amount in your bank account. The difference is that money management efforts backed by positive motivations usually can be sustained while those backed by negative motivations often cannot be sustained.
The second reason why pinching pennies is not so hot an idea is that it is a small-minded approach.
There’s a reason why we use ugly words like “miser” and “cheapscate” and “tightwad” to describe those who devote too much effort to pinching pennies. Pinching pennies truly is a small-minded thing to do.
Please be careful in how you hear the message I am putting forward here. I am not saying that saving money is small-minded. Saving money is how you win your financial freedom. Saving money is how you liberate yourself to do things more exciting and important than what you do today to earn a living.
Seeking financial freedom gets you thinking about all sorts of great things that you can do with your life that you are not able to do with it today. Saving expands you.
But the phrase “pinching pennies” suggests that you are carrying out the money management project with a ruthlessness that results in a feeling of pain. You thereby transform the life-enhancing frugality concept into something negativre. Pinching pennies gets you thinking about things you truly enjoy that you can cut out of your life. Pinching pennies narrows you.
The third reason why pinching pennies is not so hot an idea is that it causes you to bypass the most critical part of the money management process.
What’s the purpose of money management? It is not to spend less. It is to get more value out of the money you earn. It is true that there are many circumstances in which managing your money better will mean spending less. There are also many circumstances in which managing your money better will mean spending more.
Spending is not by its nature bad. Spending provides you with lots of life enhancements. To pinch pennies is to cut back on spending without thinking through whether the particular spending proposition at issue delivers a compelling life enhancement or not.
The key to effective money management is the assessment of the value propositions associated with spending and saving. The phrase “pinching pennies” suggests an aversion to spending regardless of the value proposition it offers in a particular circumstance. If your quest to pinch pennies causes you to fail to assess the value proposition offered by an enticement to spend, it can hurt you more than it helps you.
The fourth reason why pinching pennies is not so hot an idea is that pinching pennies ignores the long-term value offered by many decisions to spend.
You are thinking of trading in your old car for a new model. You elect not to because you are determined to pinch pennies. A good thing? What if your old car breaks down and you find yourself faced with big repair bills or even put yourself at risk of injury?
You are thinking of buying a health club membership. You elect not to because you are determined to pinch pennies. A good thing? What if you develop heart disease because your weight gets out of control?
Pinching pennies is a mindless approach to money management. Pinching pennies gives frugality a bad name.
The fifth reason why pinching pennies is not so hot an idea is that it serves as an unfortunate alternative to watching pennies.
Watching pennies is a wonderful idea. Most of us are able to save far larger sums than we think are possible. It’s usually not the rare large expenses that do us in. It’s the cumulative effect of the many small things we spend on mindlessly (mindless spending is just as bad or even worse than mindless saving, of course). You can open up lots of opportunities for enhancing your life by watching pennies.
What’s the difference between watching pennies and pinching pennies? The difference is the attitude applied to the task. The penny watcher compares value propositions and saves in cases in which saving looks best while continuing to spend in cases in which spending looks best. The penny pincher just tries to stop, stop, stop spending, no matter what.
The sixth reason why penny pinching is not so hot an idea is that it usually doesn’t produce much in the way of results.
I don’t mean to make fun of penny pinchers. I understand why many middle-class workers feel driven to engage in penny pinching. Most of us spend too much and realize that we are wasting a good bit of our earnings by doing so. We need to do something about it.
My goal is not to find fault with the drive you feel to begin penny pinching. It is to channel that drive into what I believe is a more rewarding direction. Don’t pinch your pennies. Watch your pennies.
It might seem like an insignificant difference in semantics. I think it’s an important distinction.
I’ve seen many middle-class workers transformed into effective savers by identifying a motivation for saving that helped them see the money management project in a more positive light.
The bottom line is that penny watching works. Penny pinching does not. That’s the most important reason why penny pinching is not so hot an idea.